Babylon Brings Desperately-Needed Utility To Bitcoin With PoS Staking Protocol

Babylon, the innovative blockchain project that's bringing increased utility to Bitcoin by enabling holders to stake BTC to secure proof-of-stake blockchains, has announced the launch of its Bitcoin Staking Protocol MVP. 

Announced at the Cosmoverse 2023 event taking place in Istanbul, Turkey, this week, the new protocol is able to overcome the limitations of Bitcoin's native scripting language. It uses advanced cryptographic techniques to make it possible for Bitcoin holders to lock BTC in a self-custodial way. At the same time, it introduces features around slashability, yield-generation and on-demand unstaking. With these features and capabilities, Babylon's protocol makes it possible for Bitcoin holders to finally benefit from a native way to earn passive income by staking their assets to secure independent PoS chains. 

Babylon, which published a litepaper earlier this year that explains its concept for Bitcoin staking, believes there will be big demand for this capability within the wider PoS blockchain community. Traditionally, PoS chains such as Ethereum, Solana, Tezos, Celo and others have always had to use their own, native digital assets to secure their blockchains. Staking is the process in which users lock up capital to secure the underlying blockchain and verify transactions, and users can earn tempting rewards for participating. However, because PoS chains can only use their own assets, they struggle to attract enough capital, and this undermines their security, especially for lesser-known networks.

Other problems include the need to implement high inflation to pay attractive staking rewards, with negative consequences for the chain's economic health. Because there are so many PoS chains around these days, there is a lot of fragmentation, as these networks are effectively competing with one another for a limited supply of staking capital. 

Instead of using their own tokens, PoS chains can now tap Bitcoin using Babylon's protocol. It brings about a best of both worlds scenario, because Bitcoin users are crying out for greater utility. Many Bitcoin holders simply buy BTC and sit on it, hoping that its price will increase. They have no simple way to utilize their BTC to earn passive income, as is possible with other crypto assets that natively interact with DeFi protocols. 

Babylon changes this, allowing Bitcoin holders to earn a passive income in the shape of PoS chain's native tokens. Meanwhile, the networks that implement BTC staking can leverage the much stronger security of the underlying Bitcoin blockchain. 

Babylon co-founder David Tse said the main innovation it offers is that it transforms BTC into a security backbone for PoS chains. "Our approach seamlessly integrates Bitcoin staking with almost any PoS protocol in a modular fashion, allowing any Bitcoin holder to earn staking rewards from a wide variety of PoS chains," he explained. "This not only amplifies economic incentives but paves the way for broader adoption, underscoring Bitcoin's diverse utility beyond its widely-recognized role as a store of value."

The first implementation of the Babylon MVP allows users to stake BTC testnet coins to secure the Bablyon Chain, which will eventually act as the control plane for other PoS chains that want to utilize the protocol. 

Babylon is launching at Cosmoverse 2023 because it has already attracted a lot of interest within the Cosmos ecosystem of blockchains, most of which use the PoS consensus mechanism. The top ten protocols within Cosmos command a combined $2.5 billion worth of staked assets. However, with these assets split among different chains, it's clear that their security can be improved. In addition, the Cosmos community has shown a strong dislike for the 21 day unbonding time, which is required to unstake any asset that secures its chains. Babylon allows for almost instantaneous unstaking. 

Babylon, which secured seed funding from backers including IDG and Breyer Capital, is aiming to further integrate itself within the Cosmos ecosystem and accelerate the idea of Bitcoin staking to enhance PoS security.